A QDRO is a Qualified Domestic Relations Order. A QDRO is a separate written order which is signed by the Judge in a divorce case and deals with the division of retirement accounts. In the majority of divorces, the parties often have retirement accounts such as 401k, 403b, 457 or other types of accounts which are to be split. If you take a distribution from one of these types of retirement accounts, then you would normally be taxed and depending on your age you would be penalized as well. A QDRO is the means by which accounts are split in a divorce without paying tax or penalties.

The QDRO typically specifies a dollar amount or percentage that the other spouse is entitled to. The QDRO also contains provisions regarding the treatment of any loans which are pending against the account. Once the QDRO is prepared and signed by the Judge, it is then sent to the plan administrator for the retirement account. A big benefit of the QDRO is that the spouse will receive their share of the pension or account directly from the plan administrator and do no need the cooperation of their former spouse.

QDRO’s can also entered when dividing pensions, even if the pension is not going to be received until several years in the future when the participant stops working and retires.

If a spouse is currently or will in the future receive a pension as a result of military service, then a certain document called a military retired pay division order will need be entered. The military retired pay division order is like a QDRO but has different requirements and provisions.

Preparing QDRO is no simple task and many family law attorneys will not prepare them. They will have separate attorneys be responsible for preparing the QDRO. The QDRO must be created in compliance with certain IRS code regulations and provisions of ERISA. If the QDRO is not prepared properly, then it will not be honored by the plan administrator.

What is the process for a successful QDRO?

1- The first step involves gathering the necessary information and documentation to prepare the QDRO.

The information needed consists of the parties’ names, current addresses, social security numbers and dates of birth.

The documentation needed is a copy of a statement from the account being divided, the marital settlement agreement and/or final judgment of dissolution of marriage.

2- Preparation of the QDRO.

3- QDRO is reviewed and approved by attorneys for both of the parties or the parties themselves if unrepresented.

4- QDRO is pre-approved by the Plan Administrator. Some plan administrators require that the draft QDRO be forwarded to them and reviewed before it is sent to the Court for entry.

5- QDRO is sent to the Judge for review and signature.

6- A certified copy of the QDRO is obtained from the clerk of court.

7- The certified copy and all other required documents are sent to the plan administrator.

8- The Plan Administrator conducts their final review. The plan administrator will determine whether the order is “qualified” or “non-qualified”. If it is non-qualified (which very rarely happens), then the QDRO gets amended.

9- The Plan Administrator sends correspondence to the receiving party informing them of the final amounts they will receive from the QDRO and their options as far as receiving the funds.

The entire QDRO process can take anywhere from 1-8 months.